April 14

How to Finance a Truck with Bad Credit

Last Updated on April 26, 2022

You’ve been eyeing that truck for a while now. You know the one – it’s big, beautiful, and has everything a truck should.  You even started making a plan for truck financing. It was a dream come true until you saw the price tag. Suddenly, that dream evaporated before your very eyes.

Price wouldn’t be an issue if you had a spanking clean credit history. However, if you have a spotty track record as a borrower or you don’t have much cash under your belt, you’re going to have to work a little harder to get that truck loan. Getting the biggest amount of money for the least amount of trouble is possible. 

Here are seven steps you can take today to turn your bad credit history into an opportunity for guaranteed semi or commercial truck financing.

1. Take a good look at your finances.

Most people shop for a truck before they shop for truck financing. We suggest you do it the other way around for the simple reason that truck prices are unlimited but your budget isn’t. Not to mention, financing will look different depending on what type of truck you’re after. Personal use trucks will differ from commercial truck financing, which may also look different from semi-truck financing. 

The more you know ahead of time, the faster the process will be. If you shop around without knowing how much you can afford first, you might be tempted to take the most expensive option right off the bat. The truth is price doesn’t always equal quality. New trucks can depreciate quickly the moment they leave the lot because they’re now in use, while some moderately used trucks are available at a great value and good condition. Plus, you don’t want to blow the bank in the process. If you set a price range and stick to that amount no matter what, it’s easier to narrow down your options to what serves your needs.

To calculate the highest amount you can realistically afford to pay per month, you need to know:

·       Your monthly income before taxes. How much do you earn every month before taxes are deducted?

·       Your trade-in value. If you have a vehicle that you can swap for the truck at a dealership, how much will the dealer pay for it?

Assuming you haven’t taken out a loan yet, you can take the two values above, plug them into the appropriate fields in this car affordability calculator, set the other fields to zero, and presto! You’ll have a rough estimate of the price range within your reach, if you’re able to pay in cash.

If you’re going to pay for your truck entirely via credit instead, stay tuned. We’ll get to that in a bit.

2. Get your business paperwork together.

If you’re buying a truck for personal use, you can skip this section. Otherwise, if the truck is for commercial or business use, you’ll have to submit proof of business paperwork. The “proof” depends on what type of business you have. For example:

If you have a new sole proprietorship/partnership, you have to present either an Employer Identification Number (EIN) or a Doing Business As (DBA) name to your lender. You can get an EIN for free via the IRS and a DBA via the U.S. Small Business Administration (SBA).

If you have an old sole proprietorship/partnership (this means your business has been running for at least a year), you can submit your IRS Schedule C as a sole proprietorship with at least one year of income, or an IRS Schedule K-1 as a partnership.

If you run an LLC or corporation, you simply have to print out a record of your business from your state’s Secretary of State website. The lender can also double-check by looking up your record online.

Aside from proof of business, you might have to submit other documents to show that you have the ability and authority to pay off your loan. For example, if you’re an owner-operator, the lender might ask for a Commercial Driver’s License (CDL), U.S. Department of Transportation (USDOT) Number, and a Motor Carrier (MC) Number.

Even if the lender doesn’t specifically ask for these, you never know when they might come in handy in the future. The paperwork may feel overbearing, but once you have all things set in place, your future endeavors will be smooth sailing.

3. Choose the truck you want to finance.

Lenders won’t just finance any truck. They’ll also look at whether it’s new or used, whether it’s a dump truck or a semi, and whether the truck is worth the loan they’ll be handing out. You can try to remember all of this or you can put yourself in the lender’s shoes. If you were them, would you finance the truck you have in mind?

Of course, money shouldn’t be your only consideration. You should also consider the size of the truck, how much mileage it has (if it’s used), how fuel-efficient it is (since gas is a regular expense for any vehicle), and other features that’ll affect how you use it. For a better idea on what you’ll be shopping for, check out our post on truck classification. Keep in mind that each type of truck will have unique financing options.

4. Decide what fits: semi or commercial truck financing.

What kind of truck do you drive? Two popular forms of truck financing include commercial and semi. You can figure out which best suits you by knowing your truck’s purpose. If you’re managing a business and are not using a semi for operation, then you should search for companies who specialize in commercial truck financing. The same applies if you manage a semi truck.

We’ve gathered information that is unique to both categories. If neither category applies to your vehicle then skip ahead to the next section.

Commercial Truck Financing

One benefit of most commercial truck financing is that interest rates are most often fixed. The time span with these contracts typically lasts around 10 years, depending on the lender.

One drawback is that interest rates can be very high, possibly up to 30%. Still, with the proper budgeting, financing is definitely doable. This provides more incentive to pay on time.

Other factors that will affect your financing costs include application fees, and even credit check fees. Be sure to account for this when working your budget. Commercial truck financing is possible with bad credit. Though your list will be limited, some companies strive to help people with low credit scores.

Semi Truck Financing

Guaranteed semi truck financing is possible, but only with the correct planning and finding the best lender. With a good credit score, you can easily shrink your interest rate amount to 5%. Without a good credit score, the rate could be as high as 30%. Nonetheless, expect to pay more if the truck you want is going to be used a great deal and would be labeled as “high-risk”. These vehicles are used to travel a lot and carry hazardous materials.

Keep in mind that for lenders in these situations, the truck operates as collateral so that the lender keeps themselves financially covered. This explains the high pricing. There’s no need to fret though. Depending on the lender, some companies offer in-house semi truck financing. In-home financing means that you can receive financing directly through the truck seller. This is great for low credit scores.

Other companies go so far as to offer no credit check semi truck financing. The benefit is that a poor credit score may not be pulled, or at the very least will not prevent you from financing. Be mindful that the interest rates in these situations may be more fixed, along with a very strict plan for repayment. For this reason you may also want to consider opening up a 0% APR credit card for part of your truck’s financing.

Best Truck Loans 

Below is a collection of loan companies that are worth looking into. While this list is helpful, you should always do your own research and compare the information about yourself (truck, business, etc) with the organization. Not every company will fit your situation.

Trust Alliance Capital:

  • Top-rated company with the Better Business Bureau.
  • Covers a wide variety of commercial and semi vehicles.
  • Flexible with credit scores.

CAG Truck Capital:

  • Works with start-ups, bad credit scores, and bankruptcy.
  • In operation for almost 4 decades.
  • Provide engine overhaul financing.

Firstmark Financial:

  • Loans to new and veteran truck owners. 
  • Offers services for a variety of truck types.

5. Figure out your down payment.

It’s hard to pin down an exact answer to “How much will my down payment be?” However, there are a few factors guaranteed to bump up your initial expenses.  

You have a low credit score. Generally, a credit score above 700 is considered “good.” Anything below that and you’ll need to take steps to improve your credit quickly.

You’re a new business. New business owners don’t have a consistent cash flow yet, so they’re considered credit risks.

You’re an owner-operator. Owner-operators usually own just one truck. If that one truck goes down, so does the owner-operator’s ability to pay off their loans.

You’re buying from a private party. Since private party transactions aren’t as structured and secure as dealer transactions, lenders find them harder to verify and therefore, riskier.

You’re buying a used truck. The older the vehicle, the more likely it is to be worn and require future repairs.

You have low cash reserves. Pretty self-explanatory.

Luckily, these factors can offset each other. For example, if you have a low credit score but your business has been going strong for at least 2 years, your down payment will be lower than that of a person who has poor credit and has been in business for less than a year. If you want an exact figure, read this guide on how big your down payment should be. Note, these are always estimates.

6. Work out your monthly installments.

At this point, you already know:

  • The price — or price range — of the truck you want to buy.
  • The trade-in value of your existing vehicle (if applicable).
  • The amount you can afford to pay every month.
  • How much of a down payment you can afford.

Given these figures, how much will you pay every month?

The answer is… it depends. If you already have an interest rate and principal amount on hand, you can plug them into this truck financing calculator — along with the details above — and have a rough estimate of your monthly payments. In the event that the monthly payments are higher than what you can afford to pay, look for another loan with different terms.

7. Find a good financing company.

The good news is that there are plenty of places where you can get a truck loan. For example, you can work with local banks, national banks, credit unions, online lenders, and dealers. 

A general good rule to remember – the bigger the company, the stricter their lending requirements. If you have bad credit, you might find it difficult to borrow from places like banks and credit unions. But if your credit history is good, those places are pretty reliable sources for truck financing.

On the flip side, online lenders and dealers are more willing to take you on even if you have bad credit. However, these lenders also charge higher interest rates and have other hidden fees bundled into their loans to compensate for the added risk they take. Consider your unique situation, and think about what works best. In the end, you have to decide whether you should improve your credit score first to borrow from more prestigious institutions, or take on a loan from seedier sources now and pay a higher price later. The choice is up to you. Whatever choice you make, be sure it’s financially sound.

Truck financing doesn’t have to be a headache. If you’re willing to shop around and don’t mind doing a little number crunching, your dream truck will soon be within reach. 


Dump Trucks, trucks

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